Supreme Court Declines to Hear Tobacco Case

October 11, 2006

The Supreme Court on Tuesday declined to hear an appeal by 30 states in a battle over payments by three small cigarette companies into accounts set up to help cover future damage awards in tobacco-related lawsuits.

The justices’ decision allows the companies to continue to fight state laws requiring payments to accounts set up as part of a $206 billion financial settlement eight years ago with the largest tobacco companies. Each of the 30 states had passed a law requiring companies that didn’t participate in that settlement to pay into the escrow funds to help cover future damage awards.

The three small companies sued, alleging the states violated antitrust law and the Commerce Clause of the U.S. Constitution. The laws each state passed were mostly identical to model legislation contained in an appendix to the settlement with the biggest tobacco companies.

The 2nd U.S. Circuit Court of Appeals in New York, the state where the settlement negotiations had taken place, allowed the small companies to pursue the antitrust claims.

In asking the Supreme Court to take the case, the state governments say the appeals court is treating a state’s most sovereign act, the passage of legislation, “as though it were the culmination of a commercial antitrust conspiracy.”

The states wanted the court to consider whether principles of due process and state sovereignty permit a federal judge in New York to exercise jurisdiction over the state attorney general in another state.

The major companies that were part of the tobacco settlement manufacture over 97 percent of all cigarettes sold in the country.

The cigarette companies are Grand River Enterprises Six Nations Ltd., Nationwide Tobacco Inc., and 3B Holdings Inc.

The case is Troy King v. Grand River Enterprises Six Nations Ltd., 05-1343.

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